Wednesday, 14 December 2016

Pensions - Have you updated your Expression of Wish?

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When you take out a pension scheme you will have completed an expression of wish, this form denotes your wishes to the pension scheme administrator regarding your beneficiaries and nominees.

With the changes to the pension rules it is now more important than ever to ensure that your expression of wish is up-to-date, otherwise there could be confusion over who the beneficiaries should be. This is because families are increasingly challenging decisions made by pension scheme trustees following the death of a member.

It falls to trustees of the scheme to make such decisions, and although they are not bound by your wishes, the expression of wish allows you to name the people that you would like them to consider when exercising discretion over who benefits should be paid to. Therefore, it is important to name everyone that you would wish to benefit on your expression of wish, in order to ensure that they receive consideration. In fact, the naming of the beneficiary far outweighs the percentage of benefit that you put down for each beneficiary or nominee, the amount of benefit can be changed, but if an individual is not on the expression of wish it is possible that they may not receive anything at all. Similarly, if you want to exclude someone from receiving death benefits, you will need to give very explicit reasons why and reinforce your wishes with a will.

In many cases, people fill in their expression of wish form when they first join a pension scheme and never update it to reflect changes to their circumstances. It is therefore advisable to revisit your expression of wish annually and ensure that it is up-to-date, you can usually do this by completing a new form from your pension provider which will replace your current expression of wish.

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Thursday, 24 November 2016

UK Autumn Statement 2016

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We weren’t expecting too many financial planning surprises in the Autumn Statement and the biggest news was the Chancellor's decision to abolish the Autumn Statement. Following the spring 2017 Budget and Finance Bill, the actual Budget will be delivered annually in the autumn, with Royal Assent taking place before the tax year begins. We have summarised some highlights of the budget below after a summary of the UK's economic performance to date as set out in the budget itself.  The full 2016 budget policy paper is available on the website.

Summary of economic performance to date

Since 2010, the government has made huge progress in turning the economy around following the Great Recession. The employment rate is at a record high and the deficit has fallen by almost two thirds. But more needs to be done. The deficit remains too high and productivity too low. In addition, the government wants to see more people sharing in the UK’s prosperity and ensure that the tax system is one where everyone plays by the same rules.

In the near term, the UK’s economic outlook has become more uncertain. The British people’s decision to leave the EU presents new opportunities, but also new challenges. The Autumn Statement sets out policies which support the economy during this transition. Alongside the forthcoming Industrial Strategy it prioritises investment to improve productivity and ultimately living standards. It provides certainty for business to secure investment and create jobs; and reprioritises spending to build an economy that works for everyone.

Personal Tax

Personal Allowance - The tax-free personal allowance is being increased to £11,500 in 2017-18. For higher rate taxpayers, the Government will also increase the threshold above which higher earners start paying 40% tax. It will increase to £45,000 in 2017-18. The Government has said that it is committed to raising the tax allowance to £12,500 or £50,000 for higher rate tax payers by the end of this parliament, once it has reached that goal then the personal allowance will increase in line with inflation.

Salary Sacrifice - The tax and employer National Insurance advantages of salary sacrifice schemes will be removed from April 2017. There are a few exceptions to this rule: arrangements relating to: pensions, childcare, cycle to work and ultra low emission cars. The result of these changes mean employees swapping salary for benefits will pay the same tax as those who pay for them out of post-tax income. Existing arrangements are protected until April 2018 with arrangements for cars, accommodation and school fees protected until April 2021.

National Insurance – The National Insurance secondary (employer) threshold and the National Insurance primary (employee) threshold will be aligned from April 2017, resulting in some additional cost to employers. Class 2 NICs will be abolished from April 2018. Thereafter, the self-employed contributory benefit entitlement will be accessed through Class 3 and Class 4 NICs.

Pensions and Savings

ISAs and Bonds - The annual ISA limit is being increased to £20,000 with effect from 6 April 2017, while the NS&I will offer a new 3 year Investment Bond with an indicative rate of 2.2% from spring 2017. Savings of between £100 and £3000 can be made to savers aged 16 or over.

Starting rate for savings – The band of savings income that is subject to the 0% starting rate will remain at its current level of £5,000 for 2017-18.

Foreign pensions - The tax treatment of pension income and lump sums arising from a foreign pension scheme will be brought into line with the treatment of some payments from a UK registered pension scheme.

Pension scams - The Government will publish a consultation shortly on options to tackle pension scams, including banning cold calling in relation to pensions, giving firms greater powers to block suspicious transfers, and making it harder for scammers to abuse ‘small self-administered scheme (SSAS) arrangements.

Corporation Tax

Business Tax Road Map - The new Chancellor confirmed his commitment to the business tax road map set out by George Osborne. This includes cutting the rate of corporation tax to 17% by 2020.

Non-resident companies to enter UK Tax Regime - The Government announced its plans to bring all non-resident companies receiving taxable income from the UK into the corporation tax regime. At Budget 2017, the Government will consult on the case and options for implementing this change.

Tax Administration

Tax Avoidance - A new penalty is being introduced for those helping someone else to use a tax avoidance scheme. The penalty is intended to ensure that those who help people tax avoiders whose tax avoidance schemes are defeated by HMRC also face the consequences.

VAT Flat Rate Scheme - A new 16.5% rate is to be introduced from 1 April 2017 for businesses with limited costs, such as many labour-only businesses, to ensure that the scheme is used only as intended.

Requirement to register offshore structures – The Government will consult on a new legal requirement for intermediaries arranging complex structures for clients holding money offshore to notify HMRC of the structures and the related client lists.

1. Old Mutual Wealth Autumn Statement 2016 Analysis
2. OneE Group Ltd Autumn Statement 2016 Analysis

Monday, 7 November 2016

Property Fund Suspensions Lifted

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An increase in negative sentiment towards the UK commercial property sector following the UK Brexit vote placed tremendous pressure on the cash liquidity buffers held within property funds. Unlike with other funds the sale of commercial property can take considerable time and, in the current market, the value of property is more volatile and difficult to accurately determine, so to manage their funds effectively, fund managers needed to take action. This resulted in five property funds suspending dealing: Aviva Property Trust; Henderson UI Property PAIF; M&G Feeder of Property Portfolio; Standard Life UK Real Estate and Columbia Threadneedle UK Property Trust, while others introduced pricing adjustments. While the funds were suspended investors could not buy, sell, transfer or switch units, but the investments held within the funds were safe as the fund managers aimed to protect the interests of existing investors.

The good news is that all but one of the UK commercial property funds that suspended dealing due to a significant increase in investors withdrawing their money following the Brexit vote have reopened for investment. Aviva Investors remains suspended however, saying in August that its fund would remain suspended for six to eight months. In a press release Aviva say that "we are committed to ensuring the trust has a sustainable liquidity position before we allow dealing to resume in order to protect the interests of all investors". 

There is reason to be optimistic since the fundamentals that underpin the popularity of property as an asset class remain in place and many analysts believe that property still has a place within a well-balanced portfolio. Although there is still uncertainty in regard to the property sector, investors should not let short-term volatility impact their long term investment goals The best thing to do if you are at all concerned is to seek the advice of your financial adviser, who will be able to advise you on the best investment strategy based on your individual circumstances.

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Wednesday, 2 November 2016

The curse of Japanese Knotweed when purchasing a property

Japanese knotweed is a non-native invasive plant species that was introduced to England as an ornamental in the mid-19th century. However, outside its native habitat of Japan and Northern China the plant has proven to be an aggressive coloniser and also highly destructive.

The issue in terms of getting a mortgage is that left to its own devices it can devalue properties by growing through floors and destroying foundations. If you suspect Japanese Knotweed or it is made known to you when thinking of purchasing a property, the mortgage lender is going to require very strong evidence that action is being taken before they will consider releasing any money. Most, if not all lenders, will require you to engage the services of a Japanese Knotweed removal professional in advance or to provide them with evidence to show that a removal plan is in place at the property. Be prepared, because treatment can cost thousands, even tens of thousands to treat.
In 2010 it was estimated to have cost the UK economy £166m a year in treatments and home devaluations, and it not only damages properties, but can become a menace in the garden itself by killing other plant species in its path. Unfortunately, you cannot just cut it back (as the weed can regenerate from small fragments and spread rapidly via its very large and intricate rhizome network underground) as Japanese Knotweed is classed as a “controlled waste” product, and if you do not dispose of it correctly you could face prosecution.
For guidance on preventing harmful weeds and invasive non-native plants spreading, there is more information available on the website at:

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Friday, 24 June 2016

Britain Votes to Leave the European Union - What's Next for Investors?

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The results are now in, Britain has decided to leave the European Union. You will no doubt have many questions around the implications of the decision, and we are on hand to offer any support we can. This post offers some commentary on what this result could mean for you as a personal investor.

Market volatility and uncertainty

The market has been subject to significant volatility and uncertainty of late and this will be exacerbated by the vote to leave and the likely political changes which will come about within the UK Government. The market will likely respond unfavourably to this potential short-term uncertainty and while the market may be expected to decline in the short term, a fall in the value of sterling relative to the Euro and/or Dollar will actually make UK exports more competitive and will boost the sterling equivalent of overseas earning for many of the large corporates in the FTSE 100. Therefore, after an initial dip, the market may return to a focus on those underlying fundamentals which may be favourable than the initial reaction might suggest.

Personal investors should also note that while the market may be driven by sentiment in the short term, not all companies will be affected in the same way by the vote to leave.  Even within the same sector different companies will be impacted in different ways.  In time the market will differentiate between those companies and this may serve to demonstrate that any initial blanket market reaction will in fact have provided buying opportunities for discerning investors able to differentiate between the impacts on different companies.

The negative short-term outlook may soon be reversed for those companies which will benefit from their exports being more competitive or their overseas earnings being more valuable in Sterling terms.  Investors will need to be sure-footed in identifying those companies which may benefit from the outcome of the vote and look for opportunities where whole sectors have been written down without any meaningful differentiation between companies to reflect the variation in impact the vote will have.  The market will return to valuations based on fundamentals in due course.

It is vitally important for markets and for personal investors that any changes in Government take place swiftly and that those charged with negotiation our exit from the EU set out as clearly as possible how they plan to steer the course for the UK going forward.  We would urge the Government not to undertake any knee-jerk reactions in terms of an emergency budget, and shout such a budget be deemed necessary tax incentives which encourage investment should not be a target for savings. To do so would be short sighted as the UK economy now more than ever before will be reliant on the small businesses, many backed by personal investors, to drive economic growth and future employment.

Sometimes doing nothing is best

Investing in the stock market can be very rewarding.  However, as share prices fluctuate, it is also possible that you can lose money. This can particularly be the case when you react to short-term stock market falls.

Stock markets go through periods of uncertainty and although the sharp falls that can be experienced at such times is understandably unsettling for investors, even tempting some to change their long-term planning by selling their investments, stock market volatility does tend to be short lived and therefore most experts agree that investors are probably better off sitting tight through these unnerving periods.

Those who sell or delay making new investments when stock markets become uncertain are actually employing a strategy known as 'market timing'.  The intention is often to invest once stock markets have calmed down or to buy when stock markets have gone even lower.  This can be a very dangerous strategy.  Sharp falls in stock markets tend to be concentrated in short periods of time.  Similarly, the biggest gains are often clustered together.  It is also quite common for a large gain to follow a big fall (or vice versa).  Accordingly, an investor who tries to anticipate when the best time is to invest runs a very high risk of missing the best gains.  This can have a big impact on their long-term return.

The information gathered for this post has been derived from articles from The Share Centre and Fidelity FundsNetwork in conjunction with the views and opinions of the Senior Partner at GDA Financial Partners.

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Friday, 20 May 2016

Why it’s important to think ahead when applying for a mortgage

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Applying for a mortgage can be a daunting prospect, but with the help of a professional mortgage adviser it doesn’t need to be.

Why is it more difficult than it used to be?

In the past, some people were allowed to take out a mortgage they could not afford. This led to some of them falling behind with their payments or losing their home. A mortgage lender must therefore check that you can afford your repayments now and in the future. To do this they will need information about your income and outgoings. So before you launch into the application process there are a number of small things you can do that could greatly increase your chances of getting your dream home.

Your credit rating is important

Your credit score enables lenders to see that you have the financial means and discipline that will be required to pay back your mortgage. Key things lenders will check include your history of repayments, so if you have any missed payments on credit cards, catalogues or any other existing debts within the last three months, this may hinder your chances. Make sure you have applied for your credit report and disclose anything that may affect a mortgage application to your mortgage adviser, with their industry knowledge they will be able to look at the most appropriate lenders for your situation.

Are you linked financially to someone else?

If you’ve got financial links to someone else, for example, a joint bank account from a previous relationship, you will need to ensure that that link is removed as soon as possible. If that person makes a late payment or has any other issue that affects their credit, it will reflect on your own report and hinder your chances of getting the best deal. As before, if you do think this may be a possibility let your mortgage adviser know as soon as possible, forewarned is forearmed.

Take a good look at how you are managing your credit

When applying for a mortgage, your last three months’ account statements will come under scrutiny so it’s a good idea to prepare ahead of time. When we talk about credit, we don’t just mean your credit card, it is also your debit balances on your bank accounts and overdraft limits. You should avoid things such as applying for credit in the run-up to a mortgage application as this would not look favourable.

The important thing to remember is that every lender is different in what they view as the ‘perfect candidate’ to lend to. Just because you don’t fit one lenders’ criteria, it doesn’t mean you won’t fit another’s. A mortgage adviser will be able to guide you through the process and advise you on all your available options, helping you to get a product that suits your personal needs and circumstances.

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Wednesday, 17 February 2016

Protecting your pension from the Lifetime Allowance Reduction

From 6 April 2016, the lifetime allowance (LTA) for pensions will reduce from £1.25m to £1m and this could potentially affect a significant number of savers according to a recent article in the Financial Times. Figures suggest that if you earn £80,000 or more, or have saved funds of £600,000 or more into your pension, you should consider action to protect your self from the LTA danger zone. Any savings in excess of the LTA will incur a tax charge of up to 55% when LTA is triggered on the withdrawal of funds.
If you think that you may breach the £1m limit during your working lifetime, e.g., you are a high earner or have a defined benefit (final salary) pension, it is a good idea to check the value of your pension to date and request projections to see how your selected retirement age and investment growth will affect that value. If you have only money purchase pensions (as opposed to a defined benefit pension), it is simply a matter of determining whether your pension fund is likely to be valued in excess of £1m by the time you draw benefits (you also need to consider any pension benefits you have previously begun to draw). You will need to take into account the likely fund growth and future level of pension contributions, but an adviser can do that for you. However, if you have benefits within a defined benefit pension scheme (deferred entitlement or benefits still accruing) it can be more complicated because these types of pension benefits are calculated on a percentage of your salary at retirement. If you are entitled to a lump sum in addition to the pension, you will also need to add this.
The government does have arrangements in place to offer some protection to savers and it may be possible for you to apply to HM Revenue and Customs for either Fixed Protection or Individual Protection, both of which can both help to reduce or eliminate an LTA tax liability. However, these protections come with conditions and the best course of action for you will depend on various individual factors and should be considered very carefully.
The LTA is a complex area, and the right solution for you will depend on your personal circumstances. Seeking independent advice will ensure that you make the right decisions in good time. If you would like more information on the LTA reduction you can read more in the LTA policy paper or ask your financial adviser.